Institutional Insights : BofA Flow Show
According to analysis by Bank of America flows in the market are as follows:
"Scores on the Doors: gold 25.0%, crypto 17.3%, stocks 17.3%, HY bonds 8.3%, IG bonds 5.4%, cash 3.9%, commodities 2.6%, govt bonds 2.1%, oil 0.5%, US$ -0.7% YTD.
The Biggest Picture: Wall St loves “panic cuts” when no panic (Chart 2); 50bps as Fed wants to slash real rates to prevent recessionary small biz sector cutting jobs (Chart 3);
Wall St chase says Fed “ahead of curve” and 250bps cuts = 15-20% EPS growth in ‘25; best “soft landing” plays = international stocks & commodities; we use rip to buy dips in Bonds & Bullion to hedge recession & inflation “tails”.
The Price is Right: soft landing tell = private equity ETF (PSP) >$70 (the ‘21 high when Fed funds 0.25%...says big rate cuts bullish macro); no landing tell = GNR>$60, KRE>$60, EEM>$45…says Wall St inflation will mutate to Main St; hard landing tell = 30-year UST rallies < 3¾% despite debt, deficits, politics, inflationary Fed.
Tale of the Tape: last time Fed eased 50bps with credit spreads this low was Jan’81, with stocks at all-time highs was Apr’86 (Table 1); historic norm is inflows to money market funds continue after 1st Fed cut for 9 months (Chart 4); but aggressive Fed ease ’09 & ’20 caused sharp drop in MMFA, and this source of blowoff top risk…note big IG bond & stock inflows this week"
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Patrick has been involved in the financial markets for well over a decade as a self-educated professional trader and money manager. Flitting between the roles of market commentator, analyst and mentor, Patrick has improved the technical skills and psychological stance of literally hundreds of traders – coaching them to become savvy market operators!